Microfinance – Around the world

INDIA – Microfinance regulation bill passed in Andra Pradesh

Posted on » Thursday, December 16, 2010

HYDERABAD: The southern Indian state of Andhra Pradesh has passed a bill to regulate microfinance firms as small cash loans to the poor come under increasing scrutiny. The new laws in the state, which is the centre of the country’s microfinance industry, aim to curb aggressive debt collection and steep interest rates that have provoked a backlash against the loan system. Critics say the new provisions could ruin a business concept invented by Nobel Peace Prize winner Muhammad Yunus and provides crucial credit for millions of poor villagers, many of them women. The new bill permits loans to be collected only at local government centres rather than at homes, which Microfinance Institutions Network (MFIN) says will make it much tougher for borrowers to repay. “The bill will make it impossible for microlenders to operate in the state and effectively put us out of business,” MFIN head Vijay Mahajan said. He said collections had already tumbled below 10 per cent in the state as farmers and villagers refused to repay. The microfinance sector was until recently hailed as a saviour of the poor for providing loans averaging $250 to millions, often small entrepreneurs, unable to get credit from mainstream banks. But surging profits, high interest rates and accusations of heavy-handed debt collection leading to suicides have led to claims that microcredit firms have become greedy moneylenders. The new bill allows lenders to make collections once a month instead of every week. Source: http://www.gulf-daily-news.com/NewsDetails.aspx?storyid=293925